Greece's third economic adjustment programme expired on August 20th 2018. Nonetheless the country's economic propects remain bleak due to underinvestment, a suffocating fiscality and a still fragile banking sector.
Since the third assistance programme was agreed upon back in 2015, Greek GDP has been improving steadily. According to the Commissioner for economic and financial affairs, Pierre Moscovici, 'The conclusion of the stability support programme is good news for both Greece and the euro area. For Greece and its people, it marks the beginning of a new chapter after eight particularly difficult years. For the euro area, it draws a symbolic line under an existential crisis'. Yet, to say that sustainable recovery is well under way would be counting the chickens before they are hatched. As of April 2018, overall unemployment in Greece was still above 20%, and the debt to GDP ratio is still around 180% - the highest in both the euro area and the EU28. Significant challenges thus remain and recovery will be conditional upon the government's ability to foster healthy and sustainable growth under significant budgetary constraints.
One of the government's top priorities is to attract foreign direct investment (FDI). This should be made easier thanks to pro-market measures implemented under the successive structural adjustment programmes. However, these measures could be implemented further and Greece's new investor-friendly environment could be even friendlier. It should also be said that, at the moment, FDI flows to Greece are mainly geared towards the tourism industry. It is deplorable that little investment is carried out in the actual industry sector, which has shrinked significantly as a result of the crisis.
The tax system should also be rebalanced with a view to alleviating the burden of taxation on middle-income earners. This should act as a stimulus for growth, although there are grounds to believe that the tax relief will be moderate.
The Greek banking sector remains highly vulnerable due to a disproportionate share of non-performing loans : about 48% of outstanding loans are currently not being repaid - that is ten times the European average. As put by Prime Minister Tsipras, the banks 'are still like a zombie [...] they do not finance the economy, this is the problem'. Hence, there is dire need to fix a banking system which still bears the scars of the financial crisis.
Finally, it must be stressed that by no means is the exit from the last bailout plan synonymous with the end of austerity. The conclusion of the assistance programme should have little positive impact on the dire social situation many Greeks are currently facing.